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Source: Content from the Economic Daily, thank you.
The market went wild yesterday (6th) with rumors that the Trump administration has initiated a “humanitarian corridor” for tariffs, releasing key provisions of the exemption clause “9903.01.34”. Products with over 20% U.S. value will be exempt from tariffs, but upon further investigation of the relevant U.S. provisions, the benchmark for determining U.S. value remains “Made in the USA”, not just supplied by U.S. manufacturers. TSMC’s new factory in the U.S. will play the role of a “savior”.
The market initially hoped that the U.S. exemption clause “9903.01.34” would illuminate a beacon for the electronics industry under the shadow of the tariff war. However, industry analysis suggests that if Trump truly allows U.S. manufacturers to supply and receive tariff exemptions, it would not have been discovered and widely circulated by Taiwanese netizens just four days after announcing reciprocal tariffs; well-known foreign media had already reported on it.
According to the key provisions released by the White House “9903.01.34”, products must meet the “Made in USA” criteria rather than “Made by USA”, and the U.S. value must account for over 20% to qualify for partial tariff exemption.
Industry analysis indicates that the U.S. has indeed set exemption conditions. For the electronics industry, which is currently most severely impacted by tariffs, to qualify for partial tariff exemptions, since components like processors and graphics chips account for over 20% of the value of laptops, servers, and Apple iPhones, breakthroughs from the chip side are the fastest.
The only solution is to supply chips through TSMC’s factory in Arizona, meaning TSMC’s U.S. factory will be a key player in leading tech giants and the laptop, server, and Apple supply chains to reduce tariff impacts, playing the role of a “savior”.
TSMC is rapidly accelerating the capacity construction of its Arizona factory, with a monthly capacity expected to reach 20,000 wafers in the first half of the year, aiming to double that to at least 40,000 wafers by the end of the year. It is understood that Apple remains TSMC’s largest customer at the new U.S. factory, holding the most capacity, followed by Qualcomm, and then Nvidia and other manufacturers.
Industry insiders are optimistic that TSMC’s U.S. factory capacity will become the “hope for saving the entire village”, with the Apple supply chain expected to be the first to address urgent needs, and the PC chain and AI server OEM chain also expected to gradually reduce some impacts.
After the Trump administration imposed a 10% tariff on multiple countries globally starting on the 5th, the U.S. Customs and Border Protection (CBP) issued guidelines stating that if a product’s U.S. production value accounts for at least 20%, the U.S.-produced portion will be exempt from the 10% tariff. The guidelines for customs declarations regarding the additional reciprocal tariffs imposed on various countries, effective on the 9th, will be announced separately. The CBP guidelines aim to clarify customs declaration principles and announce several exceptions, one of which is the “9903.01.34” clause, which states that if a product’s U.S. production value accounts for at least 20%, the U.S.-produced portion will be exempt from tariffs, but non-U.S. content will still be subject to the 10% tariff.
Industry experts point out that the North American Free Trade Agreement remains temporarily effective, covering products such as computers, laptops, mobile phones, servers, and AI servers, provided these products meet the agreement’s rules of origin. If these products are entirely produced in North America or meet specific regional value content requirements, they can enter the U.S. tariff-free.
U.S. Factory Production Will Only Account for One-Third of Revenue
According to the Financial Times, TSMC CEO C.C. Wei successfully convinced President Trump to temporarily ease pressure on TSMC this year, but has not yet convinced investors of his strategy to cope with the current trade storm.
On March 3, Wei announced an additional investment of $100 billion in the U.S., temporarily quelling Trump’s accusations of Taiwan “stealing” the U.S. semiconductor industry. Conversely, the President now states that TSMC’s additional investment will bring “a significant proportion” of chip manufacturing back to the U.S.
However, investor reactions have been lukewarm. TSMC’s ADR stock price has fallen over 17% since reaching a historic high after Trump’s inauguration in January. Their concerns stem from two aspects: if TSMC fails to meet Trump’s high expectations, he may exert pressure again; the rapid large-scale expansion of U.S. manufacturing may drag down TSMC’s traditionally excellent net profit margins. TSMC has not disclosed many details on how and when it will invest the additional $100 billion and for what specific purposes.
This contrasts with TSMC’s first commitment to invest in Arizona capacity during Trump’s first term five years ago. At that time, TSMC announced the construction start date, the process technology to be used, as well as the commercial production timeline and expected output. By the end of 2022, the company raised its investment plan to $40 billion, and again to $65 billion in April 2024, providing similar details.
However, this time, the company only stated that it would build three additional wafer fabs beyond the originally planned three and construct two additional advanced packaging plants to package multiple chips on the same substrate—this is crucial for high-end AI chips, but the technology is not yet fully available in the U.S.
Peter Hanbury, a partner at Bain & Company, stated, “They were originally planning to build multiple fabs here; the focus now is whether they have accelerated the pace. I would remain cautious. However, the advanced packaging plants are indeed not part of the original plan, so they can be seen as additional new manufacturing capacity.”
TSMC’s R&D investment has also not shown significant changes. The company stated that the “R&D team unit” committed to Arizona is only for incremental adjustments to already mass-produced process technologies, not for developing cutting-edge new technologies.
Hanbury noted, “R&D remains in Taiwan, which is a major challenge for TSMC.” He added that whether it is TSMC, Intel, or Samsung, “there is almost no scenario where semiconductor companies would relocate R&D to a new geographical area.”
Sources close to TSMC indicate that the additional $100 billion is merely an estimated cost for long-term planning, and the White House announcement is more about showcasing intent rather than a formal commitment.
TSMC had already purchased enough land to build six fabs back in 2020. A person familiar with the plan stated, “We have always indicated this is for future expansion,” adding, “Now that our first fab has entered commercial production and the yield is good, we can continue to look forward.”
However, the buffer time TSMC can gain from U.S. government pressure and threats remains unclear. Trump has repeatedly stated that he wants to impose tariffs on imported semiconductors—this would increase costs for TSMC’s customers like Apple and Nvidia, potentially prompting them to ask TSMC to share the burden.
Currently, it is expected that the government will delay imposing tariffs on chips until after April 2, when the “reciprocal tariffs” are announced. Industry experts believe this delay may be due to the technical challenges of taxing semiconductor components. A U.S. official stated that Trump’s “semiconductor tariff issue has been overshadowed by a larger trade agenda.”
Some believe this easing is only temporary. A senior executive from one of TSMC’s customers stated, “Trump must continue to exert pressure through tariffs to force TSMC and others to ensure commitments are fulfilled. He clearly likes the $100 billion figure—but don’t expect that to be enough.”
Even so, TSMC’s expansion in the U.S. is still far less than its investments in Taiwan. The company plans to build another 10 to 11 fabs in Taiwan. Bernstein analysts estimate that even if all are completed, the output from TSMC’s Arizona factory will account for at most one-third of its total revenue in the early 2030s.
Brad Lin, director of semiconductor research at Bank of America, stated, “If all $165 billion is invested, the capacity we might achieve… is about 23% to 28% of TSMC’s advanced process capacity by the end of 2026.” However, he added that due to construction times exceeding 2026, “the actual proportion should be lower.”
Brad Lin stated, “I don’t believe any global company can simultaneously expand six fabs, especially in the U.S.,” pointing out that equipment and manpower may become bottlenecks.
Additionally, TSMC must carefully plan its U.S. expansion to avoid significant impacts on profitability. Bernstein analysts calculate that the Arizona factory is still operating at a loss, and to maintain TSMC’s overall gross margin forecast of over 53%, these fabs must achieve a gross margin of 40% by the early 2030s.
In the long run, the outlook is more optimistic. TSMC executives state that the company must expand overseas due to limitations in engineering talent, land, electricity, and water resources in Taiwan, which restrict its growth potential at home.
*Disclaimer: The content of this article represents the author’s personal views. Semiconductor Industry Insights reprints it solely to convey a different perspective and does not imply endorsement or support of this viewpoint. If there are any objections, please contact Semiconductor Industry Insights.
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